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14 Steps to Safeguard Your Practice from Embezzlement

Our research staff continues to find that embezzlement is an issue that is still prevalent in practices nationwide. Consequently, we are revisiting this subject to provide additional advice.

 Minimize the Risk

More than likely, you’ve heard the horror story about a colleague whose trusted employee embezzled money from his/her practice. To preclude this from happening to you, there are steps that you could take to minimize the risk of embezzlement.

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We recommend that the following procedures become a part of your normal routine, as they will help to safeguard you from embezzlement. 

Handling Cash

  1. Make it your firm policy that you provide every patient/client with a receipt for cash payments.
  2. Cash handling and cash record keeping duties need to be segregated. Have one person collect patient/client portions over the counter and another person post balances. Have a third person make the bank deposits. As the owner, you must play an active role in monitoring sales and cash if you have too few employees to fully separate those three duties.
  3. Each month, compare the amount of cash deposited in the bank to the receipts and/or balances posted in your collections log. There could be some minor fluctuation, of course, but a significant difference for that month is a warning sign and should be investigated.
  4. Start a simple patient/client sign-in sheet listing patient names and the date signed in. Compare this on a daily basis to an over-the-counter-collections report (and day sheet or equivalent). Look for inconsistencies, such as patients/clients who are on the sign-in sheet but not listed on the day-sheet report. Spot-check by phone call to patients/clients who are reported to not have paid an amount due that day. This can be done as a “quality control” call to the patient/clients. Of the questions asked, one might be something like, “It’s our policy that all patients/clients who pay any cash on the day of service receive a receipt. Did you receive a receipt today for any cash you paid?” Put this policy in writing and IMPLEMENT IT. That will make it far more dangerous to attempt embezzlement.
  5. Make it a written policy that you conduct unannounced checks of petty cash and other cash accounts on a regular (bi-weekly or monthly) basis. Conduct those checks without fail.

Fill out the form on this page to read steps 6-14, they will provide you with the essential data regarding the proper management of your accounts receivable and other office records (highly recommended). Scroll to top

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Read steps 6-14, they will provide you with the essential data regarding the proper management of your accounts receivable and other office records (highly recommended).










Cutting down Costs vs. Increasing Production

Pretty much every owner wishes to increase their net income. Factually, there are only two ways to accomplish that: (1) cut back on expenses and (2) increase production. Now, while it is wise to do both, you might be surprised as to which one generates the most profit. Let’s take a look.

We’ll examine a single-doctor practice that is grossing $600,000 per year and we’ll set the following two parameters:

  1. If the practice runs efficiently, it could generate $1,000,000 per year.
  2. In this particular profession, the staff salary is supposed to be 22% of the gross, but is currently running at 26% – 4 percentage points above the conventional norm.

If the executive pared their staff salary expenses down to the norm (i.e., reducing it from 26% to 22%), that would increase profit by $24,000. Not bad.

But what would the profit be if the executive were to focus on expanding the practice up to the $1,000,000 mark? At that higher level, there would be an additional $400,000. Obviously, not all of that is profit. But how much of it is?

To sort this out, you would need to look at the difference between fixed costs and variable costs. Fixed costs are those that remain constant, regardless of the production level. Rent, certain insurances, license fees, etc., are expenses that are the same amount whether the practice produces $1 or $1,000,000 per year.

Variable costs, on the other hand, are costs that vary with production. Depending on the type of practice, the two greatest variable costs are 1) payroll and 2) either inventory or lab/clinical supplies. Combined, they represent anywhere from 40% to 50% of income, depending on the profession. There are a few other variable costs that will increase the percentage slightly; but for the sake of ease of explanation, we’ll focus on just those two costs.

Let’s factor in the fixed and variable costs to this $400,000 increase and see what our profit is. First, the fixed costs have already been paid from the original $600,000 income; you obviously don’t have to pay more rent because you earned an additional $400,000. The same is true of the costs of the annual license fees and probably accounting, legal and other such fixed expenses. Those bills have already been paid.

The only additional expense you incur when you produce an extra $400,000 are the variable costs. We’ve already calculated that the combined fixed and variable costs will be as much as 50% of production; so, producing an additional $400,000 will cost $200,000. The remaining $200,000 is profit.

While the choice may be abundantly clear, let’s take a look at the ramifications of the direction you decide to take and the effect that it could have on both you and your practice. Read the final half of this article by filling out this form.

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Fill out the form to read the rest of this article (Highly Recommended).











How to Guarantee a Satisfactory Retirement Fund

It is never too early in your career to start funding your retirement. You may only be one day out of school, but you should be thinking about and planning out a retirement fund.

We have found from our surveys that an ongoing decline of interest in practice ownership is making it increasingly difficult for practice owners to sell their practices, and this is causing many doctors to work in their practice years after they wanted to leave.

Unfortunately, less and less new graduates want to own a practice. More of them are looking to become associates in a practice, work 35–40 hours a week and start out with full benefits.

As part of my research, I recently spoke to a doctor in Ohio that was at retirement age. He had been in practice for over 38 years and was ready to retire. I asked him if he had adequately funded his retirement, and he told me that he had always thought that when the time came, he would sell his practice and have plenty to retire on. He found out that he was mistaken.

When I talked with him, his practice had been up for sale for over 3 years, and he couldn’t find a buyer. And of course, he was still working as he had not adequately funded his retirement outside of a practice sale. He was counting on the sale of the practice to handle his retirement. He found out, way too late, that such a plan is not always workable.

I’m hearing this story more and more from doctors all over the country.

Here are a few things that you can do to protect yourself from this situation:

  1. Place a portion of your monthly overhead into your retirement fund. Budget this in from the start. Retirement is something that needs to be figured into the overhead so that it is taken care of every month. Treat it as you would an equipment lease, a mortgage or employee salaries. Make it an ongoing expense.
  2. Find a financial planner that can properly advise you on what to do with the money that you set aside each month. Get a professional involved to help you find the best vehicle for your retirement plan.
  3. Own your practice real estate. This is a big one. Real estate is something that you can always fall back on. Even if you can’t find a buyer for your practice, you can sell real estate. If you own the building, and you find someone to buy the practice, you can lease the building to them and make a residual monthly income off the lease and have that extra income.

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Fill out the form to read the rest of this article (Highly Recommended).











Survey of Optometrists

SURVEY OF OPTOMETRISTS SHOWS FINANCES AND STAFF AS MAJOR PROBLEMS AFFECTING GROWTH

In the second in a series of articles addressing surveys The Practice Solution Magazine has conducted on the optometry, veterinary and dentistry professions, we are releasing the results of the optometry survey. Our surveys are conducted one-on-one by our trained survey team with doctors all across the United States and Canada.

The benefit of doing these surveys on the phone, rather than by questionnaire, is the ability to get all the questions answered in detail. This makes the The Practice Solution Magazine survey a bit more unique as a thorough analysis can be done of the responses.

A wide diversity of practitioners was surveyed. This ranged from doctors just starting out to doctors who have practiced for over 40 years. Fifty seven percent of those surveyed are in solo practices. Seventy two percent of those surveyed have less than five staff members.

Our survey of optometrists clearly showed that staff and financial problems are what doctors consider the primary barriers affecting the expansion and viability of optometric practices. Nearly three quarters of the doctors surveyed believed those were their most serious problems. As discussed below, these two key problems are only the outward symptoms of a much more basic underlying factor.

These problems have resulted in time consumption and lost efficiency amongst 41% of respondents while 26% felt it directly affected their bottom line. Twenty two percent believed that it resulted in stress and an overworked environment

Most of the doctors surveyed stated they didn’t learn enough in graduate school to run a practice and one hundred percent wanted more business courses to be taught in graduate school. This is indicative of the overall responses that show staff issues and finances are the key problem areas.

This also addresses the true underlying reason why the great majority of our respondents experience these financial and staff management problems. Without proper business training, it is completely expected that doctors, on the whole, would be unable to truly manage staff or finances appropriately. And, thus, the above symptoms of this lack of training are so strongly evident. One doesn’t expect an untrained lay person to be able to perform the duties of a trained doctor. Likewise then, why should a person trained to be a doctor, but never trained in business management, be expected to be competent and conversant with all the issues and problems with running a business – which is what a healthcare practice is.

To rectify not gaining an adequate education in school, seventy five percent said they attend seminars, business courses, lectures and other forms of continuing education (CE). We’ve found that many doctors spend a tremendous amount of time pursuing the education they needed to receive in school.

One disturbing figure was that over one quarter of those surveyed forgo all training and attempt to learn the business side solely by trial and error. That one out of every four doctors surveyed are “managing by chance” is cause for concern. While not true in every case, a lack of pursuit of some form of practice management education is a significant contributing factor in the struggle and sometimes failure of so many practices and businesses in the first few years of operation.

The Practice Solution Magazine has already started a new evolution of surveys for optometrists and we plan on releasing the results of that in the coming year.